Searching For Extreme Price, Minimal Risk

Monthly Archives: October 2016

While the market looks dull, it’s actually coiled up like a spring ready for its next move.

The best analysis we have found thus far, is the quote below. The analyst states that price action looks like a pendulum swinging down to rest. We’re in a brief period of dull market activity.

“These dull periods often occur after a season of delirious activity on the bull side. People make money, pyramid on their profits and glut themselves with stocks at the top. As everyone is loaded up there is comparatively no one left to buy, and the break which inevitably follows would happen if there were no bears, no bad news or anything else to force a decline.”

Indeed, it’s an excellent assessment of the price action in the S&P as seen below.

The problem is, that analysis was not written this past Thursday or Friday. No, that assessment was written over a century ago in Wyckoff’s seminal text: Studies In Tape Reading.

To understand the present, we need to understand the past: especially with stock market activity.

The human condition has not changed since inception. There’s no new ‘quant’ program that has it all figured out. If that were true, price action would look different. We would not be able to use century old techniques to call market turns to-the-day (repeatedly) as detailed here and here.

The only media mention of Wyckoff that we’ve ever seen is a brief reference by Linda Bradford-Raschke (former pit trader) at this link. At time stamp 0:36, she mentions Wyckoff. It almost slips by for those not attune.

If the pit traders know where to go for guidance, should we not do likewise?

As we come forward one hundred years, we see the S&P has coiled itself like a spring. For the past seven-plus years, it’s been delirious bull market activity as Wyckoff stated.

Traders and investors have continued to gorge or force themselves on every last up-tick. The market has now come to rest apparently unable to move higher.

What new catalyst will come to the fore to launch to higher levels? It could happen: However, the most probable resolution of this formation is a move to the downside.